Advising Potential Consumer Debtors About Their Tax Debts

It is not uncommon for issues to arise in consumer cases after they are filed regarding pre-petition and post-petition tax liabilities. To make sure that a client understands the possible outcome of these issues and is not surprised when they crop up after the bankruptcy petition is filed, it is imperative that debtor’s counsel alert and counsel the debtor about these potential issues before the petition is filed. What tax clams are nondischargeable? What constitutes a tax return for purposes of § 523? What is a tax transcript, how can one get one from the IRS, and how does one interpret what it says? This session also focuses on understanding the implications of unfiled returns and substitute returns, especially the current split among the circuits regarding late-filed returns and their consequences for determining dischargeability, distinguishing the treatment for secured, priority and general unsecured claims in chapters 7 and 13, interest on secured or nondischargeable tax claims, and advising the client as to whether chapter 7 or 13 is the best course of action to deal with the debtor’s tax liabilities.